HSBC Lowers Gold Outlook, Downgrades Barrick Gold, Yamana Gold

By Ben Levisohn

HSBC has cut its forecast for the price of gold and downgraded Barrick Gold (ABX) and Yamana Gold (AUY) in the process.

REUTERS

HSBC lowered its 2014 price target for gold from $1,435 an ounce to $1,292 an ounce, while it dropped its 2015 forecast from $1,395 to $1,310.

As a result, HSBC’s Patrick Chidley and team downgraded three stocks: Barrick Gold, Yamana Gold and African Barrick Gold.

Chidley explains why he downgraded Barrick Gold…

Based on the changes to our metals price forecasts and other model modifications, our TP falls to USD16.50 from USD19.60, and we are lowering our rating from N(V) to UW(V). Barrick may benefit this year from new mine plans which could radically improve near term cashflow, but we expect this to come at the expense of reserves and mine life.

and Yamana Gold:

Based on the changes to our metals price forecasts and other model modifications, our TP falls slightly to USD8.20 from USD9.60, and, we are downgrading the stock from N(V) to UW(V) on valuation and also concerns about the project portfolio. Despite the company’s low average costs, we believe this is more than factored in, given the USD7bn market capitalization, relatively small production base and our concerns about long term sustainability of profitability at El Penon.

Chidley cut African Barrick Gold to Underweight from Neutral courtesy of the stocks 22% rise since the beginning of December. Better bets include Royal Gold (RGLD) and Randgold Resources (GOLD), among others, Chidley says.

Barrick Gold has dropped 2.8% to $18.72 at 2:32 p.m. today, while Yamana Gold has fallen 2.7% to $9.56. Randgold Resources has declined 0.7% to $67.50 and Royal Gold is off 2.2% at $54.85. The Market Vectors Gold Miners ETF (GDX) has fallen 2.6% to $23.08, as the SPDR Gold ETF (GLD) has dipped 0.1% to $119.55.

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There are 6 comments

JANUARY 22, 2014 8:41 P.M.

Hymn wrote:

HSBC ! Who cares what they say, Aren't they going to jail for fraud ? I believe their take on gold is fraudulent.

JANUARY 22, 2014 10:30 P.M.

citizen north america wrote:

HSBC's gold opinion should carry a disclaimer with figures on how much gold China, Russia, India and Iran have acquired since such opinions and their Hedge Fund backers, caused the 30% drop in 2012.
Also how much is HSBC holding offshore tax free and in which currencies? Finally, how much is HSBC holding in its FRB Account, borrowed at virtually no interest, while gold is depreciated by their opinions?

JANUARY 24, 2014 9:16 A.M.

Sean Scottsdale wrote:

They are in the same boat with JP Morgan, in trying to control gold's short and longs. Investors and specially India, China and another few billion people trust Gold more than corrupt analyst and their bosses

JANUARY 29, 2014 11:57 A.M.

Educated Investor wrote:

Very interesting analysis that indicates lack of deep knowledge of industry and relativisim of different companies, or all together, xyx? lobby. Perhaps there are hidden intentions. Yamana happens to be well run, one of the lowest debt ratio and with one of the lowest production costs in the industry, for some time, with presence in reltively, by comparison, more stable countries. The consumers and eastern countries (China , india and ...) are buying heavily and storing, which is indicating prices tend to lean higher. However, interest groups vested in their shorts in gold and protecting currency are, counter current, pushing hard to keep this commodity down.

JANUARY 31, 2014 9:28 A.M.

WBMIKE wrote:

Hopefully everyone will take their analysis with a grain of salt. Clearly they, like most analysts, are making a GUESS at where gold will go.

My GUESS is that gold is near a low, that's not to say it won't go lower, but I think it is a great time to get into gold. I bought a few junior mining gold stocks that may have some legs in the future, not to mention a couple that have dividends along with their strong balance sheets and lower costs. Those being AUY, AGI, SVM and then also VGZ, STADF and GSS.

As we all know, they manipulate the market too by making negative comments, then snatching up those stocks low as they watch them take off.

FEBRUARY 6, 2014 7:22 A.M.

Anonymous wrote:

I am down grading HSBS to F-... That is about how much their downgrade is worth.

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